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Thursday, May 25, 2023

Friday: Personal Income and Outlays, Durable Goods

by Calculated Risk on 5/25/2023 08:39:00 PM

Mortgage RatesNote: Mortgage rates are from and are for top tier scenarios.

• At 8:30 AM ET, Personal Income and Outlays, April 2023. The consensus is for a 0.4% increase in personal income, and for a 0.4% increase in personal spending. And for the Core PCE price index to increase 0.3%.  PCE prices are expected to be up 4.3% YoY, and core PCE prices up 4.6% YoY.

• Also at 8:30 AM, Durable Goods Orders for April from the Census Bureau. The consensus is for a 1.1% decrease in durable goods orders.

• At 10:00 AM, University of Michigan's Consumer sentiment index (Final for May). The consensus is for a reading of 57.7. Reports Weekly Active Inventory Up 20% YoY; New Listings Down 26% YoY

by Calculated Risk on 5/25/2023 04:05:00 PM has monthly and weekly data on the existing home market. Here is their weekly report from chief economist Danielle Hale: Weekly Housing Trends View — Data Week Ending May 20, 2023

Active inventory growth slowed again, with for-sale homes up just 20% above one year ago. The number of homes for sale was higher than this time last year, but not by as much as we’ve seen in recent weeks. As we have discussed, further slowing is likely ahead. One key way that this has played out is by pushing some home shoppers to consider buying a newly built home.
New listings–a measure of sellers putting homes up for sale–were down again this week, by 26% from one year ago. The number of newly listed homes has been lower than the same time the previous year for the past 46 weeks. This week tied last week’s drop. With roughly two thirds of existing homeowners holding onto a mortgage more than 2 percentage points below current mortgage rates, it’s easy to see why new listings lag behind.
Realtor YoY Active ListingsHere is a graph of the year-over-year change in inventory according to

Inventory is still up year-over-year - from record lows - however, the YoY increase has slowed sharply recently.  

This was the smallest YoY increase since June 2022.

The recent trend suggests active inventory could be down YoY in June!

May Vehicle Sales Forecast: 15.3 million SAAR, Up Sharply YoY

by Calculated Risk on 5/25/2023 02:02:00 PM

From WardsAuto: May U.S. Light-Vehicle Sales Set for Biggest Volume Gain in 2023 (pay content).  Brief excerpt:

Rising inventory, combined with pent-up demand, is keeping growth going mostly by holding the long list of economic- and price-related headwinds at bay, but there is potential for demand to sharply drop at the end of the month – and in June - if an agreement on the U.S. debt ceiling remains elusive and further spooks consumers.
emphasis added
Note: When writing "biggest volume gain", Wards is referring to the year-over-year gain since sales were especially weak in May 2022.

Vehicle Sales ForecastClick on graph for larger image.

This graph shows actual sales from the BEA (Blue), and Wards forecast for May (Red).

The Wards forecast of 15.3 million SAAR, would be down 3.9% from last month, and up 21.6% from a year ago.

Vehicle sales are usually a transmission mechanism for Federal Open Market Committee (FOMC) policy, although far behind housing.  This time vehicle sales were more suppressed by supply chain issues and have picked up recently.

Total Housing Completions will Likely Decrease Slightly in 2023; The Mix will Change

by Calculated Risk on 5/25/2023 10:51:00 AM

Today, in the Calculated Risk Real Estate Newsletter: Total Housing Completions will Likely Decrease Slightly in 2023; The Mix will Change

Brief excerpt:

Although housing starts have slowed, completions will likely only decrease slightly in 2023.

Housing Completions Estimate 2023This graph shows total housing completions and placements since 1968 with an estimate for 2023. Note that the net additional to the housing stock is less because of demolitions and destruction of older housing units.

My current estimate is total completions (single-family, multi-family, manufactured homes) will decrease in 2023 to around 1.45 million, down from 1.505 million in 2022. However, the mix will change significantly from 2022 with fewer single family completions, and more multi-family completions.
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NAR: Pending Home Sales Unchanged in April; Down 20.3% Year-over-year

by Calculated Risk on 5/25/2023 10:03:00 AM

From the NAR: Pending Home Sales Recorded No Change in April

Pending home sales recorded no change in April, according to the National Association of REALTORS®. Three U.S. regions posted monthly gains, while the Northeast decreased. All four regions saw year-over-year declines in transactions.

The Pending Home Sales Index (PHSI)* – a forward-looking indicator of home sales based on contract signings – remained at 78.9 in April, posting no change from the previous month. Year over year, pending transactions dropped by 20.3%. An index of 100 is equal to the level of contract activity in 2001.

"Not all buying interests are being completed due to limited inventory," said NAR Chief Economist Lawrence Yun. "Affordability challenges certainly remain and continue to hold back contract signings, but a sizeable increase in housing inventory will be critical to get more Americans moving."
The Northeast PHSI dropped 11.3% from last month to 59.1, a decrease of 21.8% from April 2022. The Midwest index improved 3.6% to 78.4 in April, down 21.4% from one year ago.

The South PHSI increased 0.1% to 99.6 in April, sinking 16.7% from the prior year. The West index augmented 4.7% in April to 62.2, sliding 26.0% from April 2022.
emphasis added
This is way below expectations of a 0.5% increase for this index. Note: Contract signings usually lead sales by about 45 to 60 days, so this would usually be for closed sales in May and June.

Q1 GDP Growth Revised up to 1.3% Annual Rate

by Calculated Risk on 5/25/2023 08:40:00 AM

From the BEA: Gross Domestic Product (Second Estimate), Corporate Profits (Preliminary Estimate), First Quarter 2023

Real gross domestic product (GDP) increased at an annual rate of 1.3 percent in the first quarter of 2023, according to the "second" estimate released by the Bureau of Economic Analysis. In the fourth quarter, real GDP increased 2.6 percent.

The GDP estimate released today is based on more complete source data than were available for the "advance" estimate issued last month. In the advance estimate, the increase in real GDP was 1.1 percent (refer to "Updates to GDP"). The updated estimates primarily reflected an upward revision to private inventory investment.

The increase in real GDP reflected increases in consumer spending, exports, federal government spending, state and local government spending, and nonresidential fixed investment that were partly offset by decreases in private inventory investment and residential fixed investment. Imports, which are a subtraction in the calculation of GDP, increased.
emphasis added
Here is a Comparison of Second and Advance Estimates. PCE growth was revised up from 3.7% to 3.8%. Residential investment was revised down from -4.2% to -5.4%.

Weekly Initial Unemployment Claims at 229,000

by Calculated Risk on 5/25/2023 08:35:00 AM

The DOL reported:

In the week ending May 20, the advance figure for seasonally adjusted initial claims was 229,000, an increase of 4,000 from the previous week's revised level. The previous week's level was revised down by 17,000 from 242,000 to 225,000. The 4-week moving average was 231,750, unchanged from the previous week's revised average. The previous week's average was revised down by 12,500 from 244,250 to 231,750.
emphasis added
The following graph shows the 4-week moving average of weekly claims since 1971.

Click on graph for larger image.

The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims was unchanged at 231,750.

The previous week was revised down.

Weekly claims were below the consensus forecast.

Wednesday, May 24, 2023

Thursday: 2nd Estimate Q1 GDP, Unemployment Claims, Pending Home Sales

by Calculated Risk on 5/24/2023 09:01:00 PM

Mortgage RatesNote: Mortgage rates are from and are for top tier scenarios.

• At 8:30 AM ET, The initial weekly unemployment claims report will be released.  The consensus is for 250 thousand initial claims, up from 242 thousand last week.

• Also at 8:30 AM, Gross Domestic Product, 1st quarter 2023 (Second estimate). The consensus is that real GDP increased 1.1% annualized in Q1, unchanged from the advance estimate of 1.1%.

• Also at 8:30 AM, Chicago Fed National Activity Index for April. This is a composite index of other data.

• At 10:00 AM, Pending Home Sales Index for April. The consensus is for a 0.5% increase in the index.

• At 11:00 AM, the Kansas City Fed manufacturing survey for May.

Black Knight: "Mortgage Delinquencies Rise on Calendar Effect" in April

by Calculated Risk on 5/24/2023 04:05:00 PM

From Black Knight: Black Knight’s First Look: Early-Stage Mortgage Delinquencies Rise on Calendar Effect; Prepayments Slow as Spring Homebuying Season Falters on High Rates, Low Inventory

The national delinquency rate spiked 13% higher in April from March’s record low, with the month ending on a Sunday impacting the processing of payments made on the last calendar day of the month

• Early-stage delinquencies (borrowers 30 days late) bore the brunt of the rise, increasing by 200K (+25%) which matches the impact of previous similar calendar-related events

Serious delinquencies (90+ days past due) continued to improve nationally, with the number of such loans shrinking in 45 states (90%) plus the District of Columbia in April

• Foreclosure starts fell 23% to 25K for the month – the lowest since September 2022 –and 45% below April 2019’s pre-pandemic level

• Foreclosure actions were started on 4.9% of serious delinquencies in April, down slightly from March and still more than four percentage points below the monthly average prior to the pandemic

• Active foreclosure inventory declined by 6K in the month, and is down 60K or 21% from March 2020

• March saw 6,400 foreclosure sales (completions) nationally, down 14% from the month prior

• Prepayment activity (SMM) fell to 0.44% – giving back some of the previous month’s gain and suggesting the spring homebuying season is faltering on high rates and low inventory – remaining 59% off last April’s levels
emphasis added
According to Black Knight's First Look report, the percent of loans delinquent increased 13% in April compared to March and increased 2% year-over-year.

Black Knight reported the U.S. mortgage delinquency rate (loans 30 or more days past due, but not in foreclosure) was 3.31% in April, up from 2.92% the previous month.

The percent of loans in the foreclosure process decrease in April to 0.44%, from 0.46% the previous month. 
The number of delinquent properties, but not in foreclosure, is up 61,000 properties year-over-year, and the number of properties in the foreclosure process is up 14,000 properties year-over-year.

Black Knight: Percent Loans Delinquent and in Foreclosure Process
In Foreclosure0.44%0.46%
Number of properties:
Number of properties
that are delinquent,
but not in foreclosure:
Number of properties
in foreclosure
pre-sale inventory:
Total Properties1,980,0001,779,000

FOMC Minutes: Staff Predicts Recession Starting in Q4; Future Monetary Policy "less certain"

by Calculated Risk on 5/24/2023 02:13:00 PM

From the Fed: Minutes of the Federal Open Market Committee, May 2-3, 2023. Excerpt:

The economic forecast prepared by the staff for the May FOMC meeting continued to assume that the effects of the expected further tightening in bank credit conditions, amid already tight financial conditions, would lead to a mild recession starting later this year, followed by a moderately paced recovery. Real GDP was projected to decelerate over the next two quarters before declining modestly in both the fourth quarter of this year and the first quarter of next year. Real GDP growth over 2024 and 2025 was projected to be below the staff's estimate of potential output growth. The unemployment rate was forecast to increase this year, to peak next year, and then to start declining gradually in 2025.
In discussing the policy outlook, participants generally agreed that in light of the lagged effects of cumulative tightening in monetary policy and the potential effects on the economy of a further tightening in credit conditions, the extent to which additional increases in the target range may be appropriate after this meeting had become less certain. Participants agreed that it would be important to closely monitor incoming information and assess the implications for monetary policy. In determining the extent to which additional policy firming may be appropriate to return inflation to 2 percent over time, various participants noted specific factors that should bear on future decisions on policy actions. One such factor was the degree and timing with which cumulative policy tightening restrained economic activity and reduced inflation, with some participants commenting that they saw evidence that the past years' tightening was beginning to have its intended effect. Another factor was the degree to which tighter credit conditions for households and businesses resulting from events in the banking sector would weigh on activity and reduce inflation, which participants agreed was very uncertain. Additional factors included the progress toward returning inflation to the Committee's longer-run goal of 2 percent, and the pace at which labor market conditions softened and economic growth slowed.
emphasis added